Analysis Topic: Economic Trends Analysis

Friday, November 16, 2018

Amid trade wars, the outcome of the APEC meeting matters. As globalization is at crossroads, trade in Asia today will shape world trade tomorrow.

As the 21 member countries of the Asia Pacific Economic Cooperation (APEC) meet during the weekend in Papua New Guinea, there is an elevated international concern about the future of global trade amid the tide of nationalism and protectionism.

APEC member economies represent some 40% of global population, the region’s combined GDP is more than 60% of global GDP and it accounts for almost 50% of global trade in goods and services. What APEC leaders decide matters. Read full article... Read full article...

Wednesday, November 07, 2018

The recent $200 million customs debacle may be just a tip of the iceberg. Due to illicit financial flows, Philippines has lost almost $10 billion annually. Tax evasion may be as costly. In this status quo, only a fully independent anti-graft campaign can succeed.

In August, 500 kilos of shabu (methamphetamine), estimated at ₱4.3 billion (over $80 million), that entered the country was intercepted by the Bureau of Customs at Manila’s container port. The next day, authorities found similar containers, but not the drugs estimated at ₱11 billion (almost $210 million).

Wednesday, November 07, 2018

In 1944, my good friend, the late Nobelist Friedrich Hayek (1899-1992), published the Road to Serfdom. It immediately became an international sensation. In it, Hayek argued that government interventions into markets, whether they be via regulatory mandates or the outright taking of private property, will lead to an initial failure. In short, they will be counterproductive. In an attempt to correct its initial errors, the government then does more of the same, only in greater detail. Further disappointments will lead to still more far-reaching and detailed interventionist measures, until socialism and a state of total tyranny are reached.

Wednesday, October 31, 2018

We know that inflation is the debasement of money by government. The effects of inflation show up in the form of rising prices over time. The rising prices are a reflection of the loss of purchasing power of the currency involved. For our purposes, that means the U.S. dollar.

The chart below depicts increases in the Consumer Price Index, year-to-year, dating back to 1914…

Friday, October 12, 2018

We all wonder if Trump’s trade actions are as random as they appear or if there is a broader strategy.

Some of my contacts argue that the relatively strong US economy allows the administration to take a harder line than would normally be advisable. We can ride out a trade war better than China can, the thinking goes.

This only works if the US economy keeps prospering long enough for the tariffs to make China bend.

Wednesday, October 10, 2018

Last week Donald Trump, in his own estimation, succeeded in replacing what he claimed to be the "worst trade deal in history" with what he claims was "the best trade deal in history." If true, this would not only make good on one of his central campaign promises, but it would be a genuinely significant development. In reality, the unveiling of the United States-Mexico-Canada (USMCA) trade deal is just the latest iteration of the President's talent for branding. As is the case in other aspects of the president's view of economic matters, the difference between then and now is almost purely semantic.

Tuesday, October 09, 2018

Beginning this fall, and continuing throughout 2019, the stock market’s performance should be vastly different from what has occurred during the prior few years. Indeed, the huge reconciliation of stock prices is arriving now.

The primary reason behind this is the watershed change in global central banks’ monetary policies. For years central banks had been keeping rates near 0%, or below, and at the same time printing over a hundred billion dollars’ worth of fiat currencies each and every month to purchase bonds and stocks. That is all changing now. According to Capital Economics, fourteen major global central banks are either in the process right now, or have indicated that they be will next year, in the process of raising interest rates. At the same time, QE on a global net basis will plunge from $180 billion per month at its peak during 2017, to $0 by December…and will then go negative in 2019.

Tuesday, October 09, 2018

We don’t have a central bank meeting scheduled for this week, but we get the minutes of the latest ECB one. Following the upbeat remarks of President Draghi at the conference following that meeting, it will be interesting to see whether other ECB officials are on the same page. In the US, we have the CPIs for September. We get inflation data from Norway and Sweden as well.

Monday appears to be a quiet day in terms of economic releases. The only noteworthy data point we have on the calendar is German industrial production for August, which is expected to have rebounded 0.4% mom after sliding 1.1% in July.

On Tuesday, during the Asian morning, we get Australia’s NAB business survey for September. Although this is usually not a market mover, given the RBA’s emphasis on wage growth, we will take a close look at the Labour Costs sub-index. At its last two meetings, the Bank reiterated that wage growth remains low, but removed the part saying that this is likely to continue. Instead, officials noted that it has picked up a little and that further lift is expected. The NAB Labour Costs index accelerated to +1.3% qoq in the three months to August, from 0.9% in the three months to July and it would be interesting to see whether this improvement will continue as the RBA has suggested.

Tuesday, October 02, 2018

The Philippines is on the right path, if the government can continue to balance between strong growth amid international uncertainty, while pushing reforms that raise living standards. Inflation and foreign investment tell the story.

According to the just-released report by the International Monetary Fund (IMF), Philippine real GDP grew by 6.7% in 2017 and by 6.3% in the first half of 2018 on a year-to-year basis, led by strong public investment.

The current challenge is inflation, which rose to 6.4% in August 2018. That’s an average of 4.8% percent year to date, which is above the inflation target band of 2−4%. Read full article... Read full article...

Saturday, September 29, 2018

The International Monetary Fund’s $50 billion agreement with Argentina is failing. Earlier this month a scheduled $3 billion payment was postponed while the IMF and the country’s government continued to haggle in Buenos Aires. The peso extended its precipitous fall against the greenback.

The backdrop to this misery is President Mauricio Macri’s weak reform program combined with the IMF’s misdiagnosis of Argentina’s problems. Mr. Macri replaced the left-wing populist Cristina Fernández de Kirchner in December 2015. He inherited a rapidly growing public sector, huge fiscal deficits due to massive subsidies for key products, annual inflation of more than 30%, capital controls, and a dual exchange-rate system. With a slim majority in the National Congress, and facing midterm elections in October 2017, Mr. Macri adopted a gradualist approach to reform.

Thursday, September 27, 2018

The US economy is at “full employment,” says the official 3.9% unemployment rate.

The problem is that fully employed people haven’t seen enough wage growth. It’s a puzzle. Wages used to rise faster when unemployment was this low.

That’s why there was much celebration when the August jobs report showed a 2.8% annual increase in average hourly earnings for “Production and Nonsupervisory Employees,” i.e., regular workers. Read full article... Read full article...

Tuesday, September 25, 2018

Two hallmarks characterize capitalist economies. Firstly, property is predominately in private hands. Consequently, goods and services are allocated via market mechanisms in which prices provide signals for businesses, workers, and consumers. Secondly, capitalist economies are highly capitalized. Indeed, the stocks of physical and human capital are relatively large in relation to the capitalist economies’ income flows.

On those two counts, Venezuela is retrogressing. With Chavismo, which commenced when Hugo Chavez took power in 1999, Venezuela has beaten a hasty retreat from anything that would qualify as “capitalist.” Today, it is clearly in the throes of a socialist-interventionist system.

Monday, September 24, 2018

Foreign exchange rates in emerging markets have suffered significant damage against US dollar, including Asia’s high-growth economies (India, Indonesia, Philippines). Is the severity of the damage justified?

Internationally, US dollar has been fueled by the Federal Reserve’s rate hikes, oil price increases, and the Trump administration’s trade wars.

Domestically, the worst foreign-exchange performers have been emerging economies - including Argentina, Turkey, Brazil, and Russia - that are vulnerable to rate normalization, exposed to Trump tariffs, major energy importers, or whose sovereign interests have conflicted with US geopolitics.

Saturday, September 22, 2018

The richest man in China, Alibaba co-founder Jack Ma, reckons the trade war is the beginning of a long-term battle for supremacy between China and the U.S.

He’s sees no effective short-term solution to this big global issue.

China needs to strengthen its economy to fulfill its long-term shift to stronger domestic consumption while focusing on the real global growth markets in Southeast Asia, India, and Africa. Read full article... Read full article...

Friday, September 21, 2018

In just one generation, something like 300 million+ people went from rural subsistence farming to urban industrial and technology jobs. This transition from rural poverty to export powerhouse to consumer goliath may be the most consequential economic event in centuries.

Yet this story is largely ignored in the US and in much of Europe. We hear about a few projects here and there, but we don’t understand the extent.

Saturday, September 15, 2018

The Trump administration’s ‘America First’ policies come at a critical time in the global economy. These bad policies will have adverse consequences in international trade. In the absence of countervailing forces, they could unsettle the post-2008 global recovery and undermine postwar globalization.

This summer, the Trump administration’s tariff war penalized $50 billion worth of goods traded between the US and China.

The next stage of White House escalation will impact up to $200 billion of Chinese imports, and result in proportionate Chinese retaliation.

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